Feasibility Study Report: 2024

PROJECT FEASIBILITY
STUDY FOR FOOD
COMPLEX
MANUFACTURING PLANT

LOCATION :SHEGER CITY

GELAN SUB-CITY
PROJECT PROMOTER:
RAHAMET MOHAMMED
APP 2025
SHEGER ,ETHIOPIA

1
 FLOUR FACTORY PROJECT

TABLE OF CONTENTS

1 EXECUTIVE SUMMARY..............................................................................5

2. BACKGROUND INFORMATION.........................................................................7

2.1 THE PROMOTER:...........................................................................................7

2.2 BUSINESSES OBJECTIVES..........................................................................7

2.3 VISION & STRATEGY....................................................................................7

3. MARKET STUDY................................................................................................... 8

3.1 PRODUCT DESCRIPTION............................................................................8

3.2 SUPPLY ANALYSIS.........................................................................................8

3.2.1 LOCAL PRODUCTION............................................................................8

3.2.2 IMPORT................................................................................................... 11

3.2.3 TOTAL SUPPLY......................................................................................12

3.2.4 NEW ENTRANT FACTORIES/PIPE LINE PROJECTS.....................13

3.2.5 SUPPLY PROJECTION..........................................................................13

3.3 DEMAND ANALYSIS....................................................................................14

3.2.1 PERFORMANCE OF THE NATIONAL ECONOMY..............................15

3.2.2 POPULATION GROWTH AND URBANIZATION................................17

3.2.3 DEMAND PROJECTION...........................................................................19

3.4 DEMAND AND SUPPLY GAP ANALYSIS................................................19

3.5 MARKET SHARE ANALYSIS......................................................................20

3.6 MARKETING STRATEGY............................................................................21

3.6.1 PRODUCT QUALITY.............................................................................21

3.6.2 DISTRIBUTION......................................................................................21

3.6.3 PRICING..................................................................................................23

3.6.4 PROMOTION..........................................................................................24

4. TECHNICAL STUDY........................................................................................... 25

4.1 LOCATION..................................................................................................... 25

4.2 RAW MATERIALS AND INPUTS...............................................................25

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 FLOUR FACTORY PROJECT

4.2.1 RAW AND AUXILIARY MATERIALS.....................................................25

4.2.2 UTILITIES....................................................................................................26

4.3 PRODUCTION PROCESS...........................................................................26

4.4 PLANT CAPACITY.........................................................................................27

4.4.1 PLANT MACHINERY AND EQUIPMENT..............................................28

4.5 BUILDING AND CIVIL WORK....................................................................28

4.6 PROJECT IMPLEMENTATION SCHEDULE AND COST........................29

5. ORGANIZATION & MANAGEMENT...............................................................31

FINANCIAL ANALYSIS...............................................................................................34

.......................34

6.1 BASIC ASSUMPTIONS FOR FINANCIAL ANALYSES...........................34

6.1.1 PROJECT LIFE........................................................................................34

6.1.2 REPAIR & MAINTENANCE, SPARE PARTS AND INSURANCE

COST 34

6.1.3 DEPRECIATION AND AMORTIZATION...........................................34

6.1.4 WORKING CAPITAL.............................................................................35

6.1.5 DISCOUNTING...................................................................................... 35

6.1.6 INCOME TAX..........................................................................................35

6.1.7 SOURCE OF FINANCE.........................................................................35

6.1.8 REVENUE................................................................................................36

6.2 RESULT OF FINANCIAL ANALYSIS.........................................................36

6.2.1 INVESTMENT COST.............................................................................36

6.2.2 COST OF OPERATION.........................................................................37

6.2.3 SOURCE OF FINANCE.........................................................................37

6.2.4 LOAN REPAYMENT SCHEDULE........................................................37

6.2.5 PROFITABILITY......................................................................................38

6.2.6 CASH FLOW...........................................................................................38

6.2.7 DISCOUNTED CASH FLOW...............................................................39

6.2.8 BALANCE SHEET..................................................................................39

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6.2.9 SENSITIVITY ANALYSES.....................................................................40

6.2.10 ECONOMIC AND SOCIAL BENEFITS...............................................40

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1 EXECUTIVE
1
SUMMARY

The envisaged project will be a food complex factory where it will be

producing flours using modern production techniques through creation
of employment, saving the foreign currency reserve of the country. In
addition the company’s objective is to generate income for the
company in order to expand the existing and other development
activities in the country. Currently, the project promoter has finalized
researching the market for flour and has concluded it is an attractive
investment.

The production capacity of the envisaged factory working three shifts

will be producing 112 tons of flours per day. It is planned for the
factory to operate in two shifts and hence, the envisaged factory
working three shifts of eight working hours and 312 working days per
annum will be 34,944 tons (349,440 quintals per annum).

The total investment required for the project is estimated to be

approximately Birr 77 million. The cost covers investment costs of
machinery and working capital requirements. Out of the total
estimated initial costs, approximately, Birr ETB 300 million from this amount
30% (ETB 90,000,000million from owner equity and 70% (ETB 210 million) from bank
loan

The Factory will generate annual revenue of Birr 428 Million and Birr
5269.5 Million during its first and tenth years of operation,
respectively.

It is projected that principal and interest on the loan will be paid over
five years with annual interest rate of 12%.

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The cost of production with at 100% capacity utilization during the

fifth year of operation is estimated at Birr 155.4 million.

According to projected annual net profit from its operations, the

Factory will generate a net profit after tax of Birr 1.9 million during its
first year of operation and raises to Birr 12.2 million, in the fifth year
and it reaches Birr 15.9 million at the tenth year of operation. Net
profit margin lies between 11% and 25% which is attractive.

Financial return analysis indicates that the project will generate an

acceptable internal rate of return. The internal rate of return (IRR)
after tax for the project is 54%. The net present value (NPV) at a
discount rate of 10 % is nearly Birr 117.3 million.

The results of the feasibility study conducted indicate that the project
has strong potential to be a one of the best successful in producing
the products if there are necessary assistant from different various
governmental and other institutions such as banks. The market for the
products under consideration is projected to grow rapidly in the
coming years. The products will be supplied to high demanding
domestic market and also will improve the lives of the local
community through employment creation. Further, the company has a
plan to help the surrounding community by providing the required
knowhow and employment.

Finally, the project promoter would like to request a project

lease financing loan of Birr 210,000,000 (Sixty Four Million
One Hundred Forty One Thousand Two Hundred Fifty Birr).

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2 2. BACKGROUND
INFORMATION

2.1 THE PROMOTER:

The project promoter, Rahamet Mohammed is a known businessmen

engaged in different trading businesses for more than 15 years in
Ethiopia. He has a well-developed skills and experiences in the
Ethiopian cereal and grain trade which will be a great asset during the
implementation of this project.

2.2 BUSINESSES OBJECTIVES

The major business objectives of the company are:

To engage in the production of flour.

To contribute in the food sector development
Producing quality product using modern production techniques
through creation of employment and import substitution.
To generate income for the company in order to expand the
operation and other development activities in the country

2.3 VISION & STRATEGY

To be ‘one of high quality, reputable and profitable Flour

producer in Ethiopia’ this will be achieved through becoming a
multifaceted company committed in providing maximum customer
satisfaction.

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3. MARKET STUDY
3

3.1 PRODUCT DESCRIPTION

White flour is the finely ground endosperm of the wheat kernel. Major
Types of flour intended to be produced on commencement of
operations are;

è All-purpose flour is white flour milled from hard wheat’s or a

blend of hard and soft wheat. It gives the best results for many
kinds of products, including some yeast breads, quick breads,
cakes, cookies, pastries and noodles. Protein varies from 8 to 11
%.

è Bread flour is white flour that is a blend of hard, high-protein

wheat and has greater gluten strength and protein content than
all-purpose flour. Bread flour is milled primarily for commercial
bakers, but is available at most grocery stores. Protein varies
from 12 to 14 %.

è Cake flour is fine-textured, silky flour milled from soft wheat

with low protein content. It is used to make cakes, cookies,
crackers, quick breads and some types of pastry. Cake flour has
a greater percentage of starch and less protein, which keeps
cakes and pastries tender and delicate. Protein varies from 7 to
9 %.

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3.2 SUPPLY ANALYSIS

3.2.1 LOCAL PRODUCTION

The Ethiopian Flour Milling industry comprises a large number of
players that can be segmented on the basis of their production
capacity and a type of services they provide. The major partakers of
the flour industry are the flourmills, pasta, macaroni and biscuit
factories.

Given the industry’s high fixed cost requirement, profitability is largely

dependent on the company’s ability to increase volumes of sales. The
shortage of quality wheat in the domestic and international market is
making the sector challenging and it adversely affecting the
operations and profitability of flour milling companies in the country.

According to CSA’s report in Ethiopia there are 197 manufacturer of

grain mill products of which 57% are held in sole ownership, 30% are
PLC and 5% are share companies as shown in the following figure.

FIGURE 1: FLOUR MILLING PRODUCT MANUFACTURERS

Source: CSA, 2012

The numbers of grain mill product manufacturers are increasing

constantly with in the last five years from 86 in 2006/07 to 197 in
2010/11 with an average growth rate of 24%.

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FIGURE 2: FLOUR MILL ESTABLISHMENTS

Source: CSA

In Ethiopia, flour production breaks down in to three sub groups;

wheat flour, other flours and, FAFA and other flours. From 2006/7 to
2010/11 more than 1.3 million tons of flour has been produced. The
production grew with 27% average growth rate for the last five years.
The maximum production is attained in 2010/11, and on the same
year the actual value of production as a percentage of yearly capacity
for all grain mill manufacturers is about 48.4% for public and private
manufacturer.

The following table shows the total value of flour production for the
period covering 2006/07-2012/13.

TABLE 1 : LOCAL FLOUR PRODUCT MANUFACTURED (IN TONS)

Year Flour(wheat) Flour(Others) Fafa, Dube, Edget Total Growth Rate
Meten,etc Total Supply %
2006/0 140,128 7,916 11,924 159,968
7
2007/0 152,103 5,840 11,382 169,325 5.85
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8
2008/0 261,409 9,337 10,990 281,736 66.39
9
2009/1 314,053 13,644 37,971 365,668 29.79
0
2010/1 351,148 14,134 21,058 386,340 5.65
1
2011/1 578,198 127,290 32,166 737,654 90.93
2
2012/1 1,380,132 146,875 21,194 1,548,20 109.88
3 1
Averag 453,882 46,434 20,955 521,270 51
e
Source: CSA

As can be observed from the above table the total supply of flours
increased to 1.5 million tons in 2012/13 from its low level of 159,968
tons in 2006/07. The local production/supply of flours on average grew
by 51% during the years 2006/07-2012/13. The highest volume of
local production which was 1.5 tons was supplied in 2012/13 while the
lowest volume i.e. 159,968 tons in 2006/07. It can be noticed that the
local supply of flours has been increasing significantly mainly following
the increasing demand and increased production capacities of local
factories.

3.2.2 IMPORT
During the years 2009 -2014 more than Birr 1.7 billion worth of
various types of flour has been imported. During the period wheat
flour, maize flour and Maize starch has an average 69%, 9%, 9% share
respectively, as shown below.

TABLE 2: FLOUR IMPORT FOR THE YEARS 2009 – 2014

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2009 2010 2011 2012 2013 2014

CIF
CIF CIF CIF CIF CIF
HS CODE DESCRIPTION Qty in Qty in Value Qty in Qty in Qty in Qty in
Value Value Value Value Value
Ton Ton '000 Ton Ton Ton Ton
'000 Birr '000 Birr '000 Birr '000 Birr '000 Birr
Birr
--Other,Including Flours,Meals,&
03061900 Pellets Of Crustaceans, Fit For 3 337 0.35 27 - - - - - - 0 145
Human Consumption
11010000 Wheat Or Meslin Flour 99,971 337,089 7,022 45,719 63,777 491,210 23,803 187,061 17,556 159,232 33,351 304,167
11021000 Rye Flour 0 2 1,271 4,562 - - 4 44 0 1 - -
11022000 Maize (Corn) Flour 2,069 12,163 2,323 25,817 1,161 11,339 2,658 37,729 99 1,638 107 1,972
11023000 Rice Flour - - - - - - - - - - - -
11029000 Other Cereal Flour, Nes 7,231 42,465 1,732 19,916 1 76 4 74 2 67 30 838
11043010 --Teff Flour - - - - - - - - - - - -
11051000 Potato Flour, Meal And Powder. 0 5 0.11 3 - - 1 11 2 85 1 69
Flour, Meal And Powder Of The
11061000 Dried Leguminous Vegetables Of 3 22 0.16 12 2 108 2 339 1 62 9 338
0713
Flour, Meal And Powder Of
11063000 1 36 1.77 145 1 68 45 3,010 28 600 0.00 3
Products Of Chapter 8
12081000 Soya Bean Flour And Meal 2 157 0.72 20 608 15,483 0 1 0 40 0 3
Total 109,280 392,276 12,351 96,222 65,550 518,284 26,517 228,269 17,688 161,724 33,499 307,535

Source: ERCA

The summary of imported flours for the years 2009-2014 is presented

in the table below.

TABLE 3: SUMMARY OF FLOUR IMPORT FOR THE YEARS 2009 – 2014

Qty In CIF Value In Growth Rate Growth Rate

Year
Ton '000 Birr Qty Imported CIF Value
2006 2,801 34,971
2007 1,177 6,060 (57.97) (82.67)
2008 18,300 109,168 1,454.35 1,701.34
2009 109,280 392,276 497.16 259.33
2010 12,351 96,222 (88.70) (75.47)
2011 65,550 518,284 430.71 438.64
2012 26,517 228,269 (59.55) (55.96)
2013 17,688 161,724 (33.30) (29.15)
2014 33,499 307,535 89.39 90.16
AVERAGE 31,907 206,056 279.01 280.78
Source: ERCA

As can be seen from the above table, import of flours during the
period under consideration has shown a noticeable increasing trend
except slight fluctuations. During the period 2006 – 2014 import of
flours has exhibited an average annual growth rate of 279%.

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During year 2010 the imported quantity of flours declined to 12,351

tons, registering a decrease of about 88.7% compared to the previous
year (2009). During year 2012 the imported quantity of flours declined
to 26,517 tons, registering a decrease of about 59.5% compared to
the previous year (2011). In the year 2014, imported flours increased
by 89% compared to 2013.

The country spends a significant amount of hard currency for

importing of flours. During the years under consideration (2006 -2014)
the average CIF value of imported flours was Birr 206.1 Million. The CIF
value of imported flours on average grew by 73.6% over the years
under consideration. The highest and lowest import CIF value of Birr
518.3 Million and Birr 6 Million were recorded in the years 2011 and
2016, respectively.

3.2.3 TOTAL SUPPLY

During the years 2006 – 2014, the country consumed an average of
834,711 tons of flours out of which the local market contributed an
average of 94%. The table below presents the total supply of flours in
Ethiopia for the years 2006 to 2014 and the share of local production
in the total supply.

TABLE 4: TOTAL SUPPLY OF FLOURS 2006-2014

Growth Share of
Local
Impor Total Rate of Local
Year Producti
t Supply Total Producti
on
Supply on
162,76
2006 159,968 2,801 98.28
9
170,50
2007 169,325 1,177 4.8 99.31
2
18,30 300,03
2008 281,736 76.0 93.90
0 6
109,2 474,94
2009 365,668 58.3 76.99
80 8
12,35 398,69
2010 386,340 (16.1) 96.90
1 1
65,55 803,20
2011 737,654 101.5 91.84
0 4
1,548,20 26,51 1,574,
2012 96.1 98.32
1 7 718

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1,703,02 17,68 1,720,

2013 9.3 98.97
1 8 709
1,873,32 33,49 1,906,
2014 10.8 98.24
3 9 822
Avera 31,90 834,71
802,804 42.6 94.8
ge 7 1

As can be observed from the above table, the total supply of flours has
consistently been increasing throughout the years 2006 – 2014 except
a slight decrease in 2010. It increased from 162,769 tons in 2006 to
1.9 million tons in 2014. The share of local supply on average
accounted 94.8% during the years under consideration.

3.2.4 NEW ENTRANT FACTORIES/PIPE LINE

PROJECTS
According to the Ethiopian investment commission, currently there are
three factories under pre-implementation stage and no factory in
implementation stage.

3.2.5 SUPPLY PROJECTION

The supply projection is made by taking in to consideration the

installed production capacities of the existing local factories and
import has been excluded to show the available local capacity.

Assuming all other things remain constant, the local production of

flours is projected to grow by 2.6% which is the average growth rate of
the Ethiopian population. The table below presents the projected
supply, assuming that all conditions which are necessary for
production of flours are met. The flours local supply/production is
projected to be 1.6 million tons in the year 2015 and 2.1 million tons
at the end of the projection period in 2024.

TABLE 5: PROJECTED FLOURS SUPPLY

YEAR PROJECTED LOCAL

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 FLOUR FACTORY PROJECT

SUPPLY IN TON
2015 1,594,647
2016 1,642,486
2017 1,691,761
2018 1,742,514
2019 1,794,789
2020 1,848,633
2021 1,904,092
2022 1,961,215
2023 2,020,051
2024 2,080,653

3.3 DEMAND ANALYSIS

In the process of demand analysis and estimation for the product
under consideration, a thorough analysis of the set of factors that
influence the marketing forces are essentially important and
necessary. The first step in the process involves the analysis of the
underlying characteristics of the target markets and their general
macroeconomic environmental aspects.

Accordingly, the demand for Flours is a derived demand, which

depends directly on the performance of its major end users and other
general factors, which commonly affects the products. The following
factors are identified to be determent of the demand position of the
products under consideration.

 Performance of the national economy;

 Rate of population growth and

 Urbanization

Accordingly, a throughout assessment of current status and future

prospect of these factors is done as follows.

3.2.1 PERFORMANCE OF THE NATIONAL ECONOMY

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Among the factors that influence the demand for Flours, one of the
critical factors is identified to be economic growth leading to
construction and infrastructure development. Growth in Flours
products consumption has been correlated to economic growth in the
developing world.

In Ethiopia as a result of the appropriate policy adopted by the

government in recent years the country’s economy is on a higher
growth trajectory. According to the Ministry of Finance and Economic
Development (MOFED), the GDP of the country has registered an
average annual growth rate of 10.9 % during the last 11 years ending
in 2013/14 which places Ethiopia among the top performing
economies in Sub-Saharan Africa. The agriculture, industry and
service sectors’ annual average growth was 9.0%, 13.8 % and 12.2%
respectively.

According to MOFED, in the last four (2011-2014) Growth and

Transformation Plan (GTP) implementation period, the Ethiopian
economy has also registered robust growth. In this period, the GDP
annual average growth rate was 10.1%. Agriculture, Industry and
Service sectors have 6.6 %, 20.0%, and 10.7% annual average growth
rates respectively.

The economic growth (GDP at constant basic price) for 2014 is

estimated to be 10.3 %. As per MOFED’s estimates, annual growth
rates of the major sectors, i.e. Agriculture, industry and service were
5.4 %, 21.2 % and 11.9%; respectively and their shares out of the total
GDP were about 40%, 14% and 46 %, respectively.

The registered economic growth (10.3%) was obviously based on the

contribution of wide range of economic activities. The contribution of
these activities by major industrial classification shows that
Agriculture; Industry and service industries have contributed 2.3 %,
2.7% and 5.3 % respectively.

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The following table depicts the detail value added as percentage of

GDP in each sub sectors for the years 2010/11 to 2013/14.

TABLE 6: PERCENTAGE SHARE OF ETHIOPIA’S GDP IN EACH SUB-SECTOR

2011 2013
Industry\Year 2010 /11 2012 /13
/12 /14
Agriculture, Hunting and Forestry 44.6 43.1 42.0 40.1
Crop 30.9 29.8 29.4 28.4
Animal Farming and Hunting 9.6 9.3 8.9 8.3
Forestry 4.1 3.9 3.7 3.5
Fishing 0.0 0.1 0.1 0.1
Mining and Quarrying 1.4 1.5 1.4 1.3
Manufacturing 4.0 4.1 4.4 4.4
Large and Medium Scale 2.6 2.8 3.1 3.2
Manufacturing 1.4 1.3 1.2 1.2
Small Scale and Cottage Industries 1.0 1.1 1.1 1.1
Electricity and Water 4.0 4.9 6.1 7.6
Construction 14.9 15.4 15.5 16.1
Whole Sale and Retail Trade Hotels and 3.6 3.6 3.9 4.5
Restaurants Transport and
4.2 4.3 4.5 4.7
Communications
Financial Intermediation 2.5 2.9 2.4 2.6
Real Estate, Renting and Business
9.3 8.8 8.4 7.9
Activities
Public Administration and Defense 5.4 5.1 5.0 4.7
Education 2.3 2.2 2.2 2.2
Health and Social Work 0.9 0.9 0.9 0.9
Other Community , Social & Personal
2.3 2.4 2.6 2.4
Services
Private Households with Employed Persons 0.2 0.3 0.2 0.2
Total 100.7 100.6 100.6 100.7
Source: MoFED

Positive performance of the Ethiopian economy is expected to

continue in the future. According to the government’s “Growth and
Transformation Plan” during the period 2010 – 2015 the GDP of the
country is expected to grow at an average annual growth rate of 11%.
As a result, demand for the products under consideration is also
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reasonably expected to increase as economic expansion continues

which in turn will increase the demand for Flours.

3.2.2 POPULATION GROWTH AND URBANIZATION

 POPULATION GROWTH

Population is a key driver of good and service demand. According to

CSA, the population of Ethiopia grew at an average annual rate of 2.6
percent between 1994 and 2007. As shown below, the number of
population is expected to be 129 million in year 2030 from the current
number of 85 million. From the projection, the number of population in
year 2030 will be doubled of number of population which was in year
1995.

FIGURE 3: ETHIOPIA: POPULATION PROJECTION, 1995-2030

If population increases then there will be high demand of goods and

services. As the population increases, the demand for the residential
houses will also increase which in turn increases the demand for the
products under consideration.

 URBANIZATION

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As urbanization indicate people’s living standard, it is a major factor

for a higher demand of goods and services.

In Ethiopia, urban population growth rate is projected to increase by

4% annually, the major contributing factor being the rural-urban
migration. By the end of the 2009/10, the total urban population
reached to 14.4 million, amounting 17.2% from the level of 11.7
million by the end of 2004/05.

Addis Ababa, Dire Dawa, Harar, Nazareth, Gondar, Dessie, Mekele,

Bahir Dar Jimma and Hawasa are assumed to be major urban areas of
the country.

As Addis Ababa is a capital city of Ethiopia, the city holds the highest
number of population followed by Dire Dawa and Hawassa. The table
below explains the number of population in major urban areas of the
country.

TABLE 7: URBAN POPULATION NUMBER

Towns Number Of Population in

Town

Addis 3,041,002
Ababa
Dire Dawa 387,000
Hawassa 328,875
Mekele 273,601
Bahirdar 240,422
Nazareth 127,842
Gondar 112,249
Desse 97,314
Jimma 88,867
Total 4,697,172
Sources: CSA, 2007

Addis Ababa holds 65% share of the total population, 8% of the

country lives in Diredewa and 7% of the population lives in Hawassa.

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And Jimma holds the least number of populations of the country with
2%.

Consequently, the demand for goods and services is assumed to grow

with the average growth rate of urbanization.

3.2.3 DEMAND PROJECTION

In order to project the demand for flour in Ethiopia, the historical
growth rate of local production/ supply is used as a basis of projection.
The average growth rate of local production has been 51% during the
years 2006/07-2012/13. However, in order to be conservative, the
average growth rate of the Ethiopian economy (GDP) during the GTP
period i.e. 10% has been used to forecast the demand for flours. The
table below presents the projected demand for flours for the years
2015-2024.

TABLE 8: PROJECTED DEMAND FOR FLOURS

PROJECTED
YEAR
DEMAND IN TON
2015 1,703,021
2016 1,873,323
2017 2,060,656
2018 2,266,721
2019 2,493,393
2020 2,742,733
2021 3,017,006
2022 3,318,706
2023 3,650,577
2024 4,015,635

3.4 DEMAND AND SUPPLY GAP ANALYSIS

As can be observed from the table below is projected to be 108,374
tons in 20115 and 1.9 million tons in 2024. The table below presents
the projected demand and supply gap.

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TABLE 9: PROJECTED DEMAND SUPPLY GAP

PROJECTE DEMAN
PROJECTE
D D-
YEAR D SUPPLY
DEMAND SUPPLY
IN TON
IN TON GAP
2015 1,703,021 1,594,647 108,374
2016 1,873,323 1,642,486 230,837
2017 2,060,656 1,691,761 368,894
2018 2,266,721 1,742,514 524,207
2019 2,493,393 1,794,789 698,604
2020 2,742,733 1,848,633 894,100
1,112,91
2021 3,017,006 1,904,092
4
1,357,49
2022 3,318,706 1,961,215
2
1,630,52
2023 3,650,577 2,020,051
6
1,934,98
2024 4,015,635 2,080,653
2

3.5 MARKET SHARE ANALYSIS

The market share to be retaining the Factory is small as compared to
the demand and supply gap. The Factory’s market share is projected
to be 15% in year 20115 and only 1% in 2024. The table below
presents the projected demand and supply gap and the installed
production capacity of the envisaged project and the projected market
share of the factory.

TABLE 10: MARKET SHARE OF THE FACTORY AFTER EXPANSION

Production
Demand - Market Share
Capacity Of
Year Supply Gap In Of The
The Factory
Ton Factory %
In Ton
2015 108,374 10,400 10
2016 230,837 10,400 5
2017 368,894 10,400 3
2018 524,207 10,400 2
2019 698,604 10,400 1

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 FLOUR FACTORY PROJECT

2020 894,100 10,400 1

2021 1,112,914 10,400 1
2022 1,357,492 10,400 1
2023 1,630,526 10,400 1
2024 1,934,982 10,400 1

3.6 MARKETING STRATEGY

Marketing is an essential role of every business organization and
marketing activities must be performed for the survival of every
business organization. Although many factors affect an organization’s
marketing strategy, all marketing decision-making can be classified
into four strategy elements, sometimes referred to as the marketing
mix or the four P’s: Product, price, place (distribution) and
[Link] these four factors are important individually, their
real significance lies in the mix,the unique way they are combined into
a careful plan or strategy. The combination ofthese four factors is the
foundation of any marketing plan.

3.6.1 PRODUCT QUALITY

A consumer’s view on the quality of a certain brand of product is

influenced by a number of factors including the quality and safety
attributes of the flour to be produced, its package type, the brand and
the labeling. Food complex is a food where the consumption of which
can be accustomed in a repeated consumption. The ordinary
consumer will customarily evaluate the taste of the food complex
against the taste he/she regularly encounters, which indicates the
importance of consistency in food complex quality.

The ideal food complex must appear fresh, purpose fit and without
faults to the consumer and hence the quality is a matter of great
concern. Accordingly, the factory will maintain the quality of its
product and will work more to keep its quality standard.

3.6.2 DISTRIBUTION

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Distribution refers to the distribution of the product to the consumers

by the producer while channel of distribution is the network of
middlemen through whom the products flows till it finally reaches to
the hands of the actual users or consumers. It becomes difficult for a
manufacturer to adequately follow market trends and serve target
markets if a proper distribution channel and organizational set up are
not in place. Some markets are excessively supplied, while others
experience frequent shortages. Intermediaries often and deliberately
introduce artificial shortages in some brands to boost the
marketability of a weaker brand.

A distribution system for any tangible product comprises two principal

elements.

A physical distribution, or logistics, system that is concerned

with the transportation and storage of a product from the time
production is completed until the product is delivered to the
consumer; and

A set of organizational relationships among the manufacturer

and the various intermediaries, or agents, who influence the
product’s passage through the physical distribution system.

Although the two elements make up a complete channel of

distribution, the term will be used in its narrower sense only, that is, to
designate the manufacturer and the set of existing intermediaries and
to indicate the appropriate intermediaries.

Sales or distribution channels are the chain connecting producers and

consumers. This mediation function is usually performed by
specialized enterprises, agencies or representatives, using their own
marketing instruments.

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 FLOUR FACTORY PROJECT

In addition, these channels are also lines of information between

producers and consumers. Channel of distribution varies in its form
and length from consumer goods to industrial goods and within one
class of goods; it varies from product to product. For a consumer
market a retailer is essential, whereas in the industrial market the
retailer can be eliminated. Size and average frequency of customer’s
orders also influence the channel decision.

The producer must also choose whether to employ intensive, selective

or exclusive distribution. For convenience goods like flours, which are
frequently purchased, have low unit price and are bought by the
consumer at the most accessible retail outlet, shortly after a need for
them is felt, the distribution strategy should be the unloading of the
product through every possible outlet with a view to achieving an
extensive distribution.

The factory under consideration will use one or a combination of the

following distribution channels:

Factory Agent Retailer

Consumer

Factory Retailer Consumer

Factory Consumer

The factory will be employing the combination of the above types of

distribution arrangements. For instance, in Modjo Town and its
surroundings; the factory distributes the products to retailers directly
using its own vehicles and directly sell to consumers from factory
premises. In other routes on the other hand distributes through
agents.

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Implementing effective and efficient regional distribution network

covering the entire market in the country has a great role to play for
the good performance and profitability of the factory.

3.6.3 PRICING
Pricing a product is an important and critical activity since it is the
major factor in determining revenue. If a lower price is fixed, it will
affect the profitability of the company, and if a higher price is fixed,
the product will not be able to stand in market competition and may
be forced out of the market. Therefore, the right price has to be fixed.

In general, price setting is done by selecting one of the two frequently

used pricing approaches. The simplest method is cost-based approach
(Cost-plus pricing), which involves adding a standard mark-up to the
cost of the product, and competition based approach (going-rate
pricing), which bases its price largely on competitors’ prices.

The factory will employ cost plus pricing and it will keep using this
approach.

Currently, the market’s average factory get price of food complexis

Birr 1,100 per quintal and this price will be employed during the
implementation of the project.

3.6.4 PROMOTION

Market promotion is an important part of the marketing mix, as it is

required to create and increase consumer awareness, knowledge and
readiness to buy through media communications (advertising and
through special offers to trade and/or consumers (sales promotion).

Local food complexproducers practiced advertisements through

different various media channels including Television, radio and
magazines are available for producers of wheat flours. Hence, the
factory will be intensively advertising at least during the first year of
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 FLOUR FACTORY PROJECT

operation. This will contribute much in obtaining attention from

consumers about the product and its quality and difference from the
existing producers.

The factory have Birr 50,000 budget for advertising and promotion
which is projected to increase by 5% per annum.

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4 4. TECHNICAL STUDY

4.1 LOCATION
The Project is located in Sheger city Gelan Sub-city. The total land
area acquired by the Factory is 20,000 m 2. The location of the project
is strategic as it is situated in an area where the basic utilities such as
electricity, water and telephone lines are available at reasonable cost.
Availability of infrastructure for transporting the raw material to the
project site and finished good to the market are another advantage of
the location.

4.2 RAW MATERIALS AND INPUTS

4.2.1 RAW AND AUXILIARY MATERIALS

The principal raw material for flour production is wheat grain. Flour for
baking bread is produced from hard wheat or a blend of hard and soft
wheat, while flour for cakes and biscuits is milled from soft wheat.
The impurity rate for local wheat should not exceed 10% which means
in order to produce a 100 kg of wheat flour, 110 kg of raw wheat is
required.

Raw wheat is available from farmers in the wheat growing regions of

the country. The country’s wheat production has been on average
increasing by 30%. Wheat produced in the country has reached at
self-sustenance and even to exporting level implying the availability of
raw wheat to be used as an input for the factory.

Auxiliary materials required are sacks for packing flour and bran, and
jute twins. These can be easily obtained from local markets. The

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estimated annual cost of raw and auxiliary materials is given in the

table below.

TABLE 11: RAW & AUXILIARY MATERIALS REQUIREMENT & COST AT FULL
CAPACITY

Item Unit Total Qty Uint Price Total Cost

Wheat Qtl 114,400 700.00 80,080,00

0
Flour sacks (100kg, Pcs 114,400 8.00 915,200
pcs)
Twins KG 2,000.00 8.00 16,000
81,011,20
Total
0

ANNUAL COST OF RAW & AUXILIARY MATERIALS IN ‘000 BIRR

Year Year Year Year Year Year Year Year Year Year
Cost
1 2 3 4 5 6 7 8 9 10
Yearly Capacity
70% 80% 90% 95% 95% 95% 95% 95% 95% 95%
Utilization
Raw Material 56,7 68,0 76,5 80,3 84,4 88,6 93,0 97,7 102,5 107,7
Cost 08 49 56 83 03 23 54 06 92 21

4.2.2 UTILITIES
The major utilities required by the plant are electricity, water and
lubricants. The estimated annual requirement at full production
capacity and the corresponding cost are given in the table below.

Descriptio Unit of Qty. Cost ('000

n Measure Birr)

Electricity kWh 30,00 24,134

0

Water m3 1,200 4,920

Total 29,054

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4.3 PRODUCTION PROCESS

The production process of food complex consists of four major
operations:-

 Wheat Intake and Pre-Cleaning

 Wheat Cleaning and preparation
 Milling
 Packing and Dispatching

Wheat Intake and Pre-cleaning:- The major unit operations

are dumping, conveying, weighing, pre-cleaning and conveying to
storage silos or transferring to the working bins of the cleaning room.

Wheat Cleaning and Preparation: - The main unit operations

involved are weighing, screening, destoning, impurity separation,
ferromagnetic separation, scouring, aspiration, dampening, tempering
and entoleting.

Milling:- Major operations involved are weighing, breaking open,

scalping, scratching, detaching, sifting, purifying, milling (grounding),
resifting and entoleting.

Packing and Dispatching:- The major operations involved are

collection of flour streams and bran, mixing and aerating, resifting,
entoleting, packing, sewing, loading and dispatching. The process
does not release any pollutant to the environment.

4.4 PLANT CAPACITY

The production capacity of the factory working three shifts, have a

total designed capacity of producing 112 tons of flours per day.
Accordingly, the production capacity of the factory working three
shifts of eight working hours per day will be 34,944 tons per annum
operating 312 days per annum (or 349,440 quintals per annum).

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The capacity utilization in the first year of operation is planned to be

70%. The plant will utilize 80%, 90% and 95% during the second, third
and fourth years of operation. Starting from year five and thereafter
the project will utilize 100% of its full production capacity.

4.4.1 PLANT MACHINERY AND EQUIPMENT

The envisaged project will acquire a full set of Flour Mill Machine with
roller and accessories which worth Birr 300 million. The table below
presents the list and cost of planned machinery.

TABLE 12: PLANT MACHINERY AND EQUIPMENT

Total Total
Machinery Price Price
(USD) (Birr)
Plant & Machinery
"1 Set Of 112g Tpd Wheat Pneumatic Mill Plant 435,402 90,071,2
Including 30

Pre-Cleaning & Purifier & Auto 6,600 759,000

Construction build 150,000,

000

Packing Machine With Rollers 11,500 5,322,50

0

(Hs Code:84378000)" 2,500 987,500

1 Set Of Two Years Spare Parts 3,500 802,500

1 Set Of Lab Equipment 9,000 1,035,00

0

1 Set Of Vibbro Feedder 17,000 1,955,00

0

1 Set Of Vitamin Feeder（Protein Feeder） 435,402 50,071,2

30

1 Set Of Flow Scale 6,600 759,000

11,500 1,322,50
1 Set Of Weigh Bridge Scale 100t
0

485,50 303,085,
Total FOB Price
2 460

CFI 15% 72,825 8,374,91

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 FLOUR FACTORY PROJECT

Total Total
Machinery Price Price
(USD) (Birr)
0

558,32 64,207,6
Grand Total Cost 7 40

4.5 BUILDING AND CIVIL WORK

The total investment of cost existing building and civil work

construction is estimated to be Birr 250 million. The factory has built
up its factory whole and required buildings at a total land area of
2,0000 m2.

4.6 PROJECT IMPLEMENTATION SCHEDULE AND COST

 PROJECT IMPLEMENTATION SCHEDULE

The project implementation schedule covers the activities starting

from the project evaluation and approval up to the trial-run and
commissioning of the project. It is envisaged that the complete
implementation program requires a total of 5 months.

The formation of implementation team, employment of the

implementation consultant and financial arrangement will be carried
out within 1 month after the approval of the project study.

Tender document preparation and floating for plant machinery and

equipment will start one month after project approval and will take 0.5
month period. Tender evaluation, contract negotiation, signing and LC
opening, will be completed within 0.5 month. Design, engineering and
manufacture of plant machinery and equipment will be completed
within 3 months’ time frame from contract is signed.

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Erection of machinery and equipment will start after completion of the

machinery and equipment delivery and will take 1 month. Delivery of
raw materials will be arranged before erection of machinery and
equipment is completed so that it will be used for wet test
commissioning.

Recruitment and training of new manpower will start before the start
of erection of machinery and equipment and will be completed before
commissioning and start up. The plant will start dray and wet
commissioning at the 6 month after the project approval and will be
completed in 1 month. Similarly technology and knowhow transfer will
be conducted starting from and together with the erection and
commissioning activities for 0.5 month duration.

Finally the plant will start production operation at the end of the 6 th
months from the approval of the project and be operational then after.
More over Project activities will be handled by project management
tools so as to optimize time and project cost utilization towards
realization of the project on the ground with minimum project
implementation cost and time as per planned schedule.

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[Link] & MANAGEMENT

The Factory is to be organized in a way that operates successfully. The

top organ in the organizational structure is the General Manager who
will be assisted by a deputy managing director and three Section
Heads. These sections are Administration and Finance, Production and
Marketing & Sales.

The General Manager is responsible to lead, organize and coordinate

the overall operation of the project. The Administration and Finance
will handle the accounts and personnel activity of the organization.
The production and Technical Division will undertake the production
operation of the project and related maintenance works. The quality
control issue of the final product will be undertaken by an independent
quality division. The marketing Division will be responsible for the
promotional works; product marketing and sales of the vehicles. The
procurement & logistics division will be responsible for the inventory &
purchasing of the required raw material.

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The organizational structure of the envisaged Factory is presented

here under as follows.

FIGURER: ORGANIZATIONAL STRUCTURE

The manpower to be employed by the envisaged Factory is high

caliber that have technical experience in the food manufacturing
industry and will be managed by professionals with long experience.

The Factory hires about 48 skilled and unskilled workers in a

permanent basis. By offering job opportunities, the Company seeks to
alleviate the unemployment problem that is prevalent in the country.
The project during its first year of operation will pay an annual salary
of Birr 4.4 million and is projected to increase by 10% annually and
employee’s annual benefit is 25% of their wages and salary per
annum. The required manpower and salary to staffs is presented in
the table below.

TABLE 13: MANPOWER REQUIREMENT AND SALARY

No. of Monthly Annual

Title
Emp. Salary Salary
General Manager's Office
General Manager 1 30,000 360,000
Executive Secretary 1 1,000 12,000

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No. of Monthly Annual

Title
Emp. Salary Salary
Deputy Managing Manager 1 3,000 36,000

Sub Total 3 408,000

Production & Technic Section Department

Production & Technical Manager

Production
Production Head 1 20,000 240,000
Shift Leaders 2 15,000 360,000
Production Forman 2 8,000 192,000
Assistant Forman 2 7000 168,000
Operators 5 6000 360,000
Daily Laborers 10 3000 360,000
Technic
Technic Head 1 20,000 240,000
Mechanic 2 12000 288,000
Electrician 2 12000 288,000
Production Clerk 2 8000 192,000
Helpers 3 3000 108,000
Procurement

Procurement & Transit Head 1 12,000 144,000

Purchasing Officer 2 10000 240,000
Sub Total 35 3,180,000
Administration & Finance
Department
Administration Head 1 20,000 240,000
Finance Head 1 20,000 240,000
Accountants 1 8000 96,000
Time keeper 1 4000 48,000
Drivers 1 6000 72,000
Guards 3 4000 144,000
Sub Total 8 840,000

Marketing & Sales Department

Marketing & Sales Head 1 1,500 18,000

Marketing & Sales Officers 1 1,200 14,400
Sub Total 2 32,400
4,46
Grand Total 48
0,400

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6 The company will foster an organizational structure that

motivates and challenge its employees. This kind of
management will help employees to be driven, efficient and treat their
organization like a family; which will culminate in a superior product
and efficiency.

FINANCIAL ANALYSIS

6.1 BASIC ASSUMPTIONS FOR FINANCIAL ANALYSES

6.1.1 PROJECT LIFE

The operational life of the project, a standard assumption of 10 years

is considered. Hence, the costs and benefits of the project are
computed over 10 years.

6.1.2 REPAIR & MAINTENANCE, SPARE PARTS AND

INSURANCE COST

The annual repair & maintenance costs of all fixed assets as

percentage of total costs has assumed to be as follows:

 Buildings and associated civil works 2%

 Machinery and equipment 3%
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 FLOUR FACTORY PROJECT

 Office furniture and equipment 1%

6.1.3 DEPRECIATION AND AMORTIZATION

Based on the Business Income Tax Proclamation Number 286/94, the

following depreciation rates are applied to depreciate the assets of the
project:

 Buildings and associated civil works 5%

 Machinery and equipment 20%
 Office furniture and equipment 20%
 Pre-Operating expense 20%

6.1.4 WORKING CAPITAL

The working capital requirement of the project during operation is

calculated on the basis of the minimum days of coverage needed for
the different elements of the working capital. Hence, the minimum
days are specified as follows:-

TABLE 14: MINIMUM DAYS OF COVERAGE FOR WORKING CAPITAL COMPUTATION

Working
Operating Costs/Year
Days
Raw Material Cost 90

Utility (Electricity cost + 90

water)

Salary and wages 90

Administrative expenses 90

Selling Expenses 90

Fuel, Oil and Lubricants 90

Repair and Maintenance 90

Accounts Receivable 30

Accounts Payable 45
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 FLOUR FACTORY PROJECT

6.1.5 DISCOUNTING

The total investment and equity capital of the project are discounted
at 10 percent over the life of the project.

6.1.6 INCOME TAX

The income tax rate taken is 35% of income before tax.

6.1.7 SOURCE OF FINANCE

The project is assumed to be financed from bank loan and equity

contribution.

The type of loan is further assumed to be a constant principal bank

loan, with a loan repayment period of five years. The annual interest
rate including the various fees is taken to be 12 percent.

6.1.8 REVENUE

The Factory will generate annual revenue of Birr 80.1 Million and
Birr 177.5 Million during its first and tenth years of operation,
respectively. The total annual revenue to be generated by the project
during its operation years is shown in the table below.

TABLE 15: ANNUAL REVENUE IN ‘000 BIRR

Year Year Year Year Year Year Year Year Year Year
Products
1 2 3 4 5 6 7 8 9 10
80,0 96,0 113,5 125,8 139,0 146,0 153,3 160,9 169,0 177,4
Total
80 96 13 11 54 07 07 72 21 72
Revenue

6.2 RESULT OF FINANCIAL ANALYSIS

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Projections are made based on assumptions. Based on these

assumptions, a complete set of financial projections are provided in
this section. These projections include profit/loss statement, and
statement of cash flow and balance sheets. The projections are
prepared on an annual basis. Accordingly, the financial analysis results
are as discussed below.

6.2.1 INVESTMENT COST

As shown in table below, the total investment required for the project
is estimated to be approximately Birr 77 Million. The cost covers
required investment costs machinery and working capital
requirements. Out of the total estimated initial costs, approximately,
Birr 64.1 million for machinery and Birr 12.8 million will be working
capital. The table below presents the total investment costs.

TABLE 16: TOTAL INVESTMENT COST

Investment Items Total

INVESTMENT
COST
Machinery & Equipment 210,000,000
Working Capital 72,828,250
Construction build 150,000,000
Total Investment 286,969,500

6.2.2 COST OF OPERATION

The cost of production at 100% capacity utilization during the fifth

year of operation is estimated at Birr 80 million..

6.2.3 SOURCE OF FINANCE

The financing requirement of the Factory is assumed to be financed

from bank and equity contribution by the project promoter. The
project will capitalize the promoter Birr 12.8 million while the
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 FLOUR FACTORY PROJECT

remaining investment cost i.e. Birr 64.14 million is to be financed

through bank loan.

Source Total value

Company's Own Contribution 90,000,000
Bank Loan 210,000,000
Total 300,000,000

6.2.4 LOAN REPAYMENT SCHEDULE

The total amount of bank loan including interest (at an interest rate of
12%) will be fully paid back within five years’ time. The table below
presents Loan repayment schedule.

TABLE 17: BANK LOAN REPAYMENT SCHEDULE

6.2.5 PROFITABILITY

According to projected annual net profit from sales of its products, the
Factory will generate a net profit after tax of Birr 1.9 million during its
first year of operation and raises to Birr 12.2 million, in the fifth year
and it reaches Birr 15.9 million at the tenth year of operation. Net
profit to equity and net profit to total investment or return on
investment (ROI) are all attractive. The table below presents summary
of projected income statement

TABLE 18: SUMMARY OF PROJECTED PROFIT/LOSS STATEMENT IN ‘000 BIRR

PARTICULAR PROJECT YEAR

S 1 2 3 4 5 6 7 8 9 10
64,0 76,8 90,8 100,6 105,6 110,9 116,5 122,3 128,4 134,8
Sales Revenue
64 77 11 49 81 65 13 39 56 79
Costs of Goods 56,5 67,6 76,0 79,91 83,94 88,18 92,64 97,32 102,2 107,4
Sold 65 92 71 1 5 5 1 5 48 24
7,49 9,18 14,7 20,73 21,73 22,78 23,87 25,01 26,20 27,45
Gross Profit
9 5 40 8 6 0 2 4 8 5
1,73 1,88 1,99
Expenses 2,106 2,228 2,357 2,494 2,640 2,795 2,961
3 4 2
EBDIT 5,76 7,30 12,7 18,63 19,50 20,42 21,37 22,37 23,41 24,49

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PARTICULAR PROJECT YEAR

S 1 2 3 4 5 6 7 8 9 10
64,0 76,8 90,8 100,6 105,6 110,9 116,5 122,3 128,4 134,8
Sales Revenue
64 77 11 49 81 65 13 39 56 79
5 1 48 1 8 4 8 4 2 4
1,75 1,75 1,75
Depreciation 1,758 1,758 1,758 1,758 1,758 1,758 1,758
8 8 8
4,00 5,54 10,9 16,87 17,75 18,66 19,62 20,61 21,65 22,73
EBIT
7 2 90 3 0 5 0 6 4 6
1,19
Interest 993 778 542 283 0 0 0 0 0
0
2,81 4,54 10,2 16,33 17,46 18,66 19,62 20,61 21,65 22,73
EBT
7 9 12 2 7 5 0 6 4 6
1,36 3,06
Income Tax 845 4,899 5,240 5,600 5,886 6,185 6,496 6,821
5 4
1,97 3,18 7,14 11,43 12,22 13,06 13,73 14,43 15,15 15,91
NET PROFIT
2 4 8 2 7 6 4 1 8 5

6.2.6 CASH FLOW

The projected cash flow of the project shows that the project would
generate positive net cash flows throughout the operation years. The
cumulative cash flow generated by the project at the end of year ten
will amounts to 113 Birr Million which has been birr 9.6 million in the
first year of operation. Details are shown in annex.

6.2.7 DISCOUNTED CASH FLOW

A. INTERNAL RATE OF RETURN

The internal rate of return (IRR) is an indicator of the efficiency or

quality of an investment. A project is a good investment proposition if
its IRR is greater than the rate of return that could be earned by
alternate investments or putting the money in a bank account.
Accordingly, the IRR of the project is computed to be 54% indicating
the viability of the project.

B. NET PRESENT VALUE

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Net present value (NPV) is defined as the total present (discounted)

value of a time series of cash flows. NPV aggregates cash flows that
occur during different periods of time during the life of a project in to a
common measuring unit i.e. present value. It is a standard method for
using the time value of money to appraise long-term projects. NPV is
an indicator of how much value an investment or project adds to the
capital invested. In principle a project is accepted if the NPV is non-
negative.

Accordingly, the net present value of the project at 10% discount rate
is found to be Birr 117.3 Million which is acceptable.

6.2.8 BALANCE SHEET

The positive financial performances of the project are manifested in

the balance sheet as well. As can be seen from the projected balance
sheet depicted in annex, the net worth of the project, which was about
Birr 51.8 Million at the beginning of the operation year, will rise to Birr
190.1 Million at the end of the project life.

Important financial efficiency ratios like current ratio, quick ratio, net
working capital ratio, assets to current liabilities, etc. all show that the
project is highly liquid and has sound financial performance. See below
for details.

6.2.9 SENSITIVITY ANALYSES

Sensitivity analyses on selected cost components have been further

conducted to test the strength and viability of the project. In view of
this, extreme conditions like cost escalation on investment and
production cost and a decrease of sales price due to various factors
have been therefore examined. The result of the sensitivity analysis
show the project is highly sensitive to decrease in sales revenue while
it still is viable with an increase of 50% in investment cost and 30% in
cost of production.

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6.2.10 ECONOMIC AND SOCIAL BENEFITS

The economic impact of the project can be viewed in a number of

ways. It can be viewed through its specific impact such as
employment generation and increasing government revenue.
Moreover, other benefits such as the creation of conducive
environment for the development of the country should also be taken
into account.

The project creates employment opportunities for 61 persons.

Moreover, during the life of the project it will generate an average of
Birr 11.6 million in terms of corporate tax and also contributes in the
form of payroll tax. Furthermore the factory will have foreign currency
saving effect to the country by substituting part of the existing
imports.

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ASSUMPTIONS
&
ANNEXES

ASSUMPTIONS AND BASIS FOR PROJECTION

Working Days Per Month 26

Working Days Annum 312 per annum

Number Of Shifts 2 per day

Working Hours 8.00 per shift

Full Production Capacity

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Production Capacity Per Hour 4.7 Tons

Production Capacity Per Shift 37.33 Tons
Production Capacity Per Annum ,400 Tons
Annual Production In Quintal 34,944 Qtl

Total Annual Production Capacity 166,400.00 Qtl/annum

of attainable
YEAR 1 70%
capacity
of attainable
YEAR 2 80%
capacity
Capacity Utilization
of attainable
YEAR 3 90%
capacity
of attainable
YEAR 4 & > 95%
capacity
of attainable
YEAR 5 & > 100%
capacity

Market Segmentation local market 100% of production

Selling Price
BIRR/Qtl

of wage and
Employees Benefit 25%
salaries
Loading & Unloading 300,000 Birr/Annum

Stationary 25,000 Birr/Annum

Lease fee 78,872 Birr/Annum

Transport 0.5% Of Revenue

Miscellaneous 50,000 Birr/Annum

Promotion 50,000 Birr/Annum

Professional 50,000 Birr/annum

Birr/kwh +
Electric Charge 0.8 134 service
charge
Water Charge 4.1 Birr/M3
Fuel Cost Diesel 83 Birr/litter
Regular 85 Birr/litter

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Oil & lubricant 10% of fuel cost

fire, lightening & of building &

1.5%
flood machinery cost
Insurance Rate
Vehicle 3% of vehicle cost

For Building &

5% Associated Civil
works
For machinery
20%
& equipment
Depreciation & Amortization
Rate
For furniture
20%
& fixture
For Pre-
20% production
expenditure

For building &

2%
civil work
For machinery
3%
& equipment
Repair & Maintenance For Office
1% furniture &
equipment

For machinery
3%
& equipment
Spare Parts

115 Birr/USD
Exchange Rate As of Aug, 2024

Fuel And
1.05
Lubricants
Raw Material 1.05

Yearly Increase In Expenses Labor Salary 1.1

Selling Price 1.05

General Increase
1.05
in Costs

Dividend 50%

46 FEASIBILITY STUDY REPORT

 FLOUR FACTORY PROJECT

Tax Rate 35%

Discount Rate 10%

Grace Period On Repayment Of Loan 0 year(s)

Interest Rate On Long Term
12%
Loan
Loan Repayment Year 5 year(s)

 ANNUAL PRODUCTION IN QUINTAL IN TWO

SHIFTS
Products Year 1 Year 2 Year 3 Year 4 Year 5 & >
PRODUCTION 70% 80% 90% 95% 100%
Flours 72,800 83,200 93,600 98,800 104,000

 SELLING PRICE PER QUINTAL

Year Year Yea Yea Yea Yea Yea Yea Yea Yea
Products
1 2 r3 r4 r5 r6 r7 r8 r9 r 10
Selling 1,100 1,155 1,213 1,273 1,337 1,404 1,474 1,548 1,625 1,706
Price

 REVENUE
IN ‘000
BIRR
Produc Year Year Year Year Year Year Year Year Year Year
ts 1 2 3 4 5 6 7 8 9 10
80,08 96,09 113,5 125,8 139,05 146,0 153,3 160,9 169,0 177,47
Flours
0 6 13 11 4 07 07 72 21 2

FACTORY OVERHEAD
ELECTRICITY & WATER

47 FEASIBILITY STUDY REPORT

 FLOUR FACTORY PROJECT

Description Machine Annual KWH Total

ry & water cost
power requirement (Year 1)
installed (M3)
(KW)

Electricity 100 30,000 24,134

Consumption
Water 1,200 4,920
consumption

Total 29,054

INSURANCE

Total Cost of
Description
cost Insurance
210,000, 1,924,238
Fixed Assets
000
Total 1,924,238

REPAIR & MAINTENANCE

Total Cost of Rep &

Description
cost maintain

210,000, 3% 1,924,238
Machinery & Equipment
000

Total 1,924,238

SPARE PARTS

Description Total cost Cost of spare parts

48 FEASIBILITY STUDY REPORT

 FLOUR FACTORY PROJECT

Machinery & Equipment 2,583,007 3% 1,924,238

Total 1,924,238

49 FEASIBILITY STUDY REPORT

Feasibility Study Report: 2024

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